MultiChoice jumps on JSE debut

MultiChoice Group soared 16% in debut trading in Johannesburg as the pan-African pay-TV company embarks on a new era of independence following a spin off by technology giant Naspers.

The shares traded at R111.12 as of 11am on Wednesday, valuing the company at almost R50-billion. That’s the biggest listing in the city since Steinhoff International Holdings unbundled its Africa retail operations, now known as Pepkor Holdings, almost 18 months ago. The shares first traded at R95.50, valuing it at about R42-billion.

“We are happy with where the share opened and how it is trading,” MultiChoice chief financial officer Tim Jacobs said in an interview at the local stock exchange. “We expect it to settle down in the next three months.”

The move creates an Africa-focused company free from Cape Town-based Naspers, which has expanded around the world since making a blockbuster early investment in Chinese giant Tencent in 2001. MultiChoice broadcasts live sport such as English Premier League soccer, global hit dramas like Game of Thrones and locally produced content, and services about 14 million households.

“We have identified about 40 million additional subscribers that could be signed on in the middle income and mass market,” Jacobs said. About half the company’s current customer base is in South Africa, and the focus after listing will be to accelerate growth on the rest of the continent, he said.

Challenges

MultiChoice faces challenges from cheaper online alternatives — including Netflix — which have sprung up alongside rising African household incomes and faster Internet speeds. To compete, the company is pushing its own video-on-demand service, Showmax, and a mobile app for the TV footage, the CFO said.

Naspers is seeking to realise value from its myriad assets to help narrow the difference between its US$129-billion stake in Tencent and the lower value of the company as a whole. The spin-off of MultiChoice is also an attempt to reduce its dominance of the JSE, where it made up about 18% of the benchmark index before the listing. The stock has declined 5.3% in past 12 months, valuing the company at R1.4-trillion.

MultiChoice’s valuation could eventually settle at about $5-billion to $6-billion (R69-billion to R83-billion), according to Bloomberg Intelligence analyst John Davies. The company has about R4-billion in cash and R4-billion in undrawn facilities, so didn’t need to raise cash from the listing, Jacobs said.  — Reported with assistance from Renee Bonorchis, (c) 2019 Bloomberg LP